Jetrader - July/August 2012 - 13

While we refer to Asia as a homogenous region, it comprises distinct sub-regions, including North Asia, South East Asia and South Asia (the Indian subcontinent). There are not only large travel markets within these sub-regions, but there is a lot of trafﬁc between these respective sub-regions, as outlined above. In many cases, airlines are able to substitute single aisle aircraft (A320/B737s) between domestic ﬂights as well as on regional routes. Moreover, if airline ownership rules are relaxed—within ASEAN as a ﬁrst step—then it should quickly drive a convergence within the region as a whole. Data for the ASEAN region above—yes, where Lion Air is based—deserves a closer look. Indeed, there are some uncanny comparisons between the ASEAN region and Ireland—they’re both markets with a lot of aircraft in commercial service relative to the underlying size of their economy. Both markets (ASEAN and Ireland) share the following distinct characteristics: • Isolated geographies: Large archipelagos in Asia—especially Indonesia and the Philippines as well as the split geography of Malaysia—give rise to huge domestic market trafﬁc ﬂows. The island nature of Ireland’s geography supports a lot of trafﬁc which abandoned ship many years ago (pardon the pun!) • No alternative forms of domestic travel: This begs the question how big Europe’s domestic airline market would be if its rail system was not such a good travel alternative. Rail or road travel in the U.S.—together at least—form a distinct alternative mode of travel to compete with local airlines. While China is rapidly building out a domestic rail network, this mode of transport is simply absent from most of ASEAN and the Indian

subcontinent. If one doesn’t ﬂy in these markets, there is no time efﬁcient alternative. • The real growth opportunity for Ryanair emerged following the creation of a single European Sky. ASEAN Open Skies should create the same opportunity for the Asian region. Just as Ireland sits on the doorstep of continental Europe, a comprehensive airline network within ASEAN (under a single brand and common ownership) will also be able to access large forecast trafﬁc growth in China and India. Based on Ascend data, the Asia-Paciﬁc region accounts for approximately 40 percent of all deliveries (100+ seat size) in 2012 and 2013, both by value and seat count. Allowing for some aircraft retirements, etc, this suggests that the region’s growth should remain in the 7 to 9 percent range over coming years. If the history of Ryanair’s success is any guide, the Asian market should be able to digest this growth over the coming years. Conclusion: The global aerospace industry should be thanking its lucky stars that Asia has a strong wind to its back! Undoubtedlty, there are risks to the region’s growth, but while these are largely outside the region, they could pose a threat to Asia’s trade balances, etc. Still, if Asian governments remain supportive of the industry’s growth, the structural factors of population growth and rising GDP per capita should support long-term growth opportunities for our industry. Note: The opinions are those of the author and do no necessarily reﬂect the opinions of BOC Aviation.

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Jetrader - July/August 2012

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